Educational Savings Accounts
When it comes to getting a college education, financing is one of the most important considerations that you will need to make. Unfortunately for far too many, it is one of the last factors thought about when it comes to the education of our children. If you are a parent, you owe it to your child and yourself to plan and plan carefully to cover the cost of your child’s education. There are, fortunately, a few great ways in which you can do this.
The most common is to begin by opening an educational saving account for your child (under the age of 18). When you open educational savings account for your child, you can contribute up to $2,000 per year per child. It is a combined total contribution however and includes the financial gifts of grandparents, friends, and family in addition to your contributions. The money from these funds can be withdrawn tax-free if they are used for educational purposes.
Educational expenses, in this case, include books, tuition, fees, supplies, and college room and board provided that your child is at least a part-time student. If you do not use all the funds for your child, there are options as far as what to do with the remaining funds in the account. The first option would be to leave the funds in the account and allow the account beneficiary to withdraw them up until the age of 30. There is a penalty involved, and the recipient will be required to pay income tax on those funds. You could also elect to roll those funds over to the next child under the age of 18 who will have educational expenses in the future.
The money you set aside in these accounts to cover the cost of the education of your child or children is not tax-deductible. However, it is a great way to begin saving money and investing in the future of your child. If you start spending the maximum amount $2,000 per year upon birth, your child should have a nice nest egg to help cover educational expenses.
If your child is fortunate enough to qualify for scholarships and other sources of financial aid you can turn the funds over as a graduation gift or save it for the next college student in your family that comes along. Either way, you’ve saved yourself a good part of the worry that goes along with providing for your family by having this fund set up for your children.
You can sign up for programs like Upromise to subsidize your contributions with donations from corporate sponsors as their way of thanking you for buying their products or using their services on any credit cards that you, your friends, and your family members have registered to go into your child’s account. Every edge you give yourself when it comes to investing in the education of your children is an edge worth having. College tuition rates are rising at an alarming rate while corporate expectations of college degrees are growing at the same near lightning speed. It means that a college degree is more critical for our children than in any past generations.
Take the time now to check into securing the future of your children by establishing an educational savings account. Let friends and family know that any gifts they are planning to give your children that involve money would be appreciated if they instead invested in the future of your children rather than now. You can also ask your friends and family to sign up their credit cards with Upromise to provide a little bump in donations to your child’s college savings account. These small steps add up to significant savings throughout 18 years. You might find that the investment you are making is adequate to cover the costs of your child’s tuition in full.
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